Both supply and demand curves comprise some elasticity

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Reference no: EM1338419

Excise tax - supply curve

The government levies an excise tax of 5 cents per unit sold on the sellers in a competitive industry. Both supply and demand curves have some elasticity with respect to price. This tax means that the:

A) supply curve shifts to the left by 5 cents, but (unless demand is perfectly elastic) price will not rise.

B) supply curve shifts to the left by less than 5 cents, but (unless demand is highly elastic) price will rise by the full five cents.

C) supply curve shifts to the left by less than 5 cents, but (unless demand is highly inelastic) price will rise by more than 5 cents.

D) supply curve shifts to the left by 5 cents, but (unless supply is perfectly elastic) any price rise will be less than 5 cents.

E) demand curve shifts to the right by 5 cents, and price will rise by 5 cents.

Reference no: EM1338419

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